Why Japan’s Manufacturing Activity Improved in December 2017

Japan’s manufacturing activity in December

Japan’s manufacturing PMI (purchasing managers’ index) improved in December 2017, rising to 54 from 53.6 in November 2017. Whereas the index was slightly below the preliminary market estimate of 54.2, it marked the strongest expansion in manufacturing activity since February 2014.

Why Japan’s Manufacturing Activity Improved in December 2017

The solid rise in Japan’s manufacturing PMI in December 2017 was mainly due to the following:

  • production volume and output improved
  • new and export orders rose at a faster rate
  • employment in the manufacturing sector improved

Stronger demand from major Asian economies India (INDA) and China (FXI) (YINN) and the developed economies of Europe (VGK) and the United States (SPY) mainly boosted new business orders in December 2017. Weakness in Japan’s currency supported its export growth.

In contrast, higher metal and oil prices strengthened input cost inflation, and weakness in the Japanese yen (FXY) improved various businesses’ operating expenses. Higher domestic demand is improving businesses’ short-term economic outlook (EWJ) (DXJ). In the next part of this series, we’ll analyze the UK manufacturing PMI in December 2017.